Gold prices hit 2-mth low as fresh US-Iran hostilities boost oil, dollar
While yields remain an important longer-term influence on silver, over the near term, it’s increasingly becoming the crude oil and US dollar show.
- Silver coils beneath resistance as bulls defend trend support
- Dollar direction may determine whether silver breaks higher or rolls over
Bulls Defend Trend Support
Silver finds itself pulling back towards a support zone comprising former resistance at $77 and the uptrend dating back to the lows struck on May 20 on the H4 timeframe, creating a potentially interesting entry point for longs considering the broader structure the price trades within resembles something akin to an ascending triangle and channel cross.
The price tested the support zone earlier today and bounced strongly, so if we see a repeat performance with the current candle, longs could be set ahead of the uptrend with a tight stop beneath for protection, targeting a run back towards $78 where the price has repeatedly struggled over recent days. Should the setup play out as planned, traders could then assess whether to hold, reduce or reverse the position depending on the price action above $78.
Source: TradingView
Considering there’s little in the way of visible resistance above the double top at $78.90 struck on May 19, a break of that level, especially given the coiling structure silver finds itself trading within, could set the stage for a more pronounced bullish move towards $82 or $83 where the price did plenty of work either side of earlier this month.
Of course, should the price break the May 20 uptrend and hold there, the bullish bias would be invalidated.
For now, the oscillators are broadly neutral in their messaging with RSI (14) holding above 50 while MACD has pushed marginally into positive territory. To be sure, the flattening in both indicators suggests the fleeting upside momentum that had been building has stalled for now, but the price action and broader structure continue to favour long setups at this stage.
Dollar Remains the Constant Influence
What may ultimately determine whether the setup plays out is the behaviour of the US dollar. While yields have remained an important influence on silver over longer timeframes, over the near term it’s increasingly become the crude oil show, which in turn is clearly influencing broader direction in the greenback as markets react to shifting expectations surrounding inflation and the Fed rate outlook.
Source: TradingView
That relationship can be seen clearly in the correlation matrix above, where silver’s inverse relationship with DXY has remained consistently strong across every timeframe measured, even as correlations with equities, volatility, and yields continue to fluctuate.
While other macro drivers may come and go in terms of their influence, the dollar continues to loom as the key variable that may ultimately determine whether the precious metal breaks higher from the coiling structure or rolls over instead.